The ANZ Consumer Confidence fell more than 4 per cent last week, way below the neutral level of 100.
However, while consumer confidence was falling, the February 2022 Roy Morgan Business Confidence jumped by 19pts (+18.7 per cent) to 120.5 – the biggest monthly increase during the pandemic and essentially returns business confidence to its pre-omicron level.
There were positive moves across all aspects of the index and now, 62.3 per cent of businesses said they expect “good times” for the Australian economy over the next year while a majority or 53.1 per cent of businesses said that the next 12 months will be a “good time to invest in growing the business”.
On a state-based level there were large monthly increases across the board in February led by Victoria, up a large 29.5pts (+30.6 per cent) to 125.7, South Australia, up 25pts (+25.7 per cent) to 122.5, Queensland, up 17pts (+18.3 per cent) to 109.5 and Western Australia, up 14.6pts (+12.6 per cent) to 130.4 – once again the highest business confidence in the nation as the state prepared to fully reopen its borders in early March.
Property and business services was the most confident industry in the first two months of 2022 with business confidence at 131.3 although this is down slightly, by 1.5pts (-1.2 per cent), on a year ago.
Also performing well was transport, postal and warehousing with a business confidence of 124.0, an increase of 18.6pts (+17.7 per cent) on a year ago and agriculture on 123.7, but down by 13.1pts (-9.6 per cent) on the first two months of 2021.
Rounding out the top five most confident industries over the first two months of 2022 are public administration and defence on 121.9, but down 11.2pts (-8.4 per cent) on a year ago, and administration and support services on 121.3, an increase of 6.3pts (+5.4 per cent) on a year ago.
There were five industries for which business confidence is lagging and were below the neutral level of 100 in early 2022. Unsurprisingly, it is recreation and personal that had the lowest business confidence of all industries in January and February 2022 at only 76.1, a drop of 24pts (-24 per cent) on a year ago.
Michele Levine, chief executive of Roy Morgan said the quick recovery in the index came as the highly contagious, but relatively mild, omicron variant dissipated during February that again highlighted the underlying strength of the Australian economy.
“Also heading in the right direction is the latest Roy Morgan unemployment and under-employment estimates for February – now at a total of 16.3 per cent of the workforce, the lowest since the COVID-19 pandemic began,” she said.
“Although the emergence of the Omicron strain caused havoc for the economy early this year the quick rebound in Business Confidence suggests GDP growth should quickly return to its previous trajectory.
“However, there are clearly concerns that are set to impact on the next few months including the uncertainty of the Federal Election, due in May, and the impact of the Russian invasion of Ukraine. The heavy sanctioning of Russia following the invasion has led to rapid increases in the prices of many commodities including oil, gas, coal and other metals as well as foodstuffs including wheat.
“Russia (and Ukraine) are large exporters of many of these key goods and the sanctions and restrictions brought in have already led to significant price rises. For instance, for the first time Australians are now paying over $2 a litre for petrol – and this price could escalate further if the situation continues to deteriorate.
“The impact of higher inflation will be felt by all Australians over the next few months and this is set to lead to interest rate increases later this year, although likely after the Federal Election. The handling of an inflationary environment most Australians have never experienced is set to provide the first big test for whichever party is elected in May.”
In the ANZ data on consumer confidence, all subindices fell. The “Current financial conditions” decreased by 5.2 per cent and “future financial conditions” fell 4.0 per cent while “Current economic conditions” declined 3.9 per cent, falling 13.9 per cent over the past four weeks. ‘Future economic conditions” dropped 5.2 per cent.
“Household inflation expectations jumped to 5.6 per cent last week, its highest level since November 2012,” ANZ head of Australian economics, David Plank said.
“Rapid gains in petrol prices are likely the key reason for the lift. Households are certainly noticing the effect of higher prices on their finances, with overall confidence dropping 4.3 per cent and all sub-indices lower.
“Confidence is well below neutral, at its lowest level since October 2020 and is below neutral in all states. The surge in inflation expectations heightens the risk of a shift in the ‘psychology’ of inflation that requires more aggressive action from the RBA. Though, if the recent fall in oil prices is sustained, we would expect inflation expectations to ease.”
